<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period ______________________ to _________________________
Commission file number 1-9245
NABORS INDUSTRIES, INC.
- - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 93-0711613
- - - ---------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 W. GREENS ROAD, SUITE 1200, HOUSTON, TEXAS 77067
- - - --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
713-874-0035
- - - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- - - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if change since
last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
Number of shares of common stock outstanding as of January 31,
1995 totaled 83,813,304.
<PAGE> 2
NABORS INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
December 31, 1994 and September 30, 1994 2
Condensed Consolidated Statements of
Income and Retained Earnings for the Three
Months Ended December 31, 1994 and 1993 3
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended December 31,
1994 and 1993 4
Notes to Condensed Consolidated
Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
</TABLE>
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(Unaudited)
December 31, September 30,
1994 1994
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,008 $ 22,563
Marketable securities 23,310 22,669
Accounts receivable, net 110,705 102,069
Rig inventory and supplies 15,721 15,029
Prepaid expenses and other current assets 16,571 15,745
---------------- ----------------
Total current assets 175,315 178,075
Property, plant and equipment, net 292,102 283,141
Marketable securities 9,515 20,266
Other long-term assets 10,021 8,791
---------------- ----------------
Total assets $ 486,953 $ 490,273
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 13,501 $ 16,536
Short-term borrowings 3,454 6,502
Trade accounts payable 31,829 34,190
Accrued liabilities 41,916 40,220
Income taxes payable 3,709 2,379
---------------- ----------------
Total current liabilities 94,409 99,827
Long-term obligations 58,220 61,879
Other long-term liabilities 7,720 8,251
Deferred income taxes 3,493 2,892
---------------- ----------------
Total liabilities 163,842 172,849
---------------- ----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.10 per share:
Authorized 10,000 shares; none issued
or outstanding - -
Capital stock, par value $.10 per share:
Authorized common shares 200,000;
issued and outstanding 84,540 and 84,380 8,454 8,438
Authorized Class B shares 8,000, none issued or
outstanding - -
Capital in excess of par value 221,957 218,319
Cumulative translation adjustment (3,859) (2,748)
Net unrealized (loss) gain on marketable
securities (1,782) 1,345
Retained earnings since May 1, 1988 103,135 95,165
Less treasury stock, at cost, 755 and 506
common shares (4,794) (3,095)
---------------- ----------------
Total stockholders' equity 323,111 317,424
---------------- ----------------
Total liabilities and stockholders'
equity $ 486,953 $ 490,273
================ ================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 4
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(Unaudited)
1994 1993
---------------- ----------------
<S> <C> <C>
Revenues $ 126,002 $ 133,932
---------------- ----------------
Operating expenses:
Direct costs 93,745 104,033
General and administrative expenses 11,639 12,085
Depreciation and amortization 6,963 6,896
---------------- ----------------
Operating expenses 112,347 123,014
---------------- ----------------
Operating income 13,655 10,918
---------------- ----------------
Other income (expense):
Interest expense (1,948) (2,198)
Interest income 586 636
Gain (loss) on sales of long-term assets (79) 1,586
Other income (expense), net 1,337 (707)
---------------- ----------------
Other expense (104) (683)
---------------- ----------------
Income before income taxes 13,551 10,235
Income taxes 2,478 1,170
---------------- ----------------
Net income 11,073 9,065
Reclassification of pre-quasi-
reorganization tax benefit (3,103) (1,860)
Retained earnings, beginning of period 95,165 93,815
---------------- ----------------
Retained earnings, end of period $ 103,135 $ 101,020
================ ================
Earnings per share $ .13 $ .11
---------------- ----------------
Weighted average number of shares outstanding 86,727 84,376
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 5
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
1994 1993
-------------- ---------------
<S> <C> <C>
Net cash provided by (used for) operating activities $ 6,565 $ (328)
-------------- ---------------
Cash flows from investing activities:
Purchases of marketable securities, held to maturity (7,736) -
Maturities of marketable securities, held to maturity 15,928 -
Purchases of marketable securities, available for sale - (4,257)
Payments received on investment in sales-type
leases and notes receivable 46 98
Capital expenditures (17,757) (7,793)
Proceeds from sales of long-term assets 368 1,935
-------------- ---------------
Net cash used for investing activities (9,151) (10,017)
-------------- ---------------
Cash flows from financing activities:
Decrease (increase) in restricted cash 270 (27)
Decrease in long-term borrowings, net (6,694) (9,608)
Decrease in short-term borrowings, net (3,048) (496)
Common and treasury stock transactions (1,497) 19,692
-------------- ---------------
Net cash (used for) provided by financing activities (10,969) 9,561
-------------- ---------------
Net decrease in cash and cash equivalents (13,555) (784)
Cash and cash equivalents, beginning of period 22,563 63,052
-------------- ---------------
Cash and cash equivalents, end of period $ 9,008 $ 62,268
============== ===============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 6
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 INTERIM FINANCIAL INFORMATION
The unaudited condensed consolidated financial statements of
the Company are prepared in conformity with generally accepted accounting
principles, but do not purport to be a complete presentation inasmuch as all
note disclosures required are not included. Reference is made to the Company's
1994 Annual Report on Form 10-K for additional note disclosures.
In the opinion of management, the condensed consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position of
the Company as of December 31, 1994 and the results of its operations and its
cash flows for the respective periods ended December 31, 1994 and 1993.
Interim results for the three months ended December 31, 1994 are not
necessarily indicative of results which will be realized for the full year
ending September 30, 1995.
NOTE 2 ACQUISITIONS
During October 1994, the Company consummated its merger with Sundowner Offshore
Services, Inc. ("Sundowner"), a company that provides contract well servicing
and workover services in the Gulf of Mexico and various international offshore
markets utilizing self-contained, modular platform and jackup workover rigs.
Under the merger agreement, Sundowner stockholders received 2.8 shares of the
Company's common stock for each of their shares of Sundowner. As a result, the
Company issued 13.1 million common shares to Sundowner stockholders.
The merger has been accounted for as a pooling-of-interests. Accordingly, the
accompanying condensed consolidated financial statements have been
retroactively restated to include the results of operations, financial position
and cash flows of Sundowner for all periods prior to consummation of the
merger. In addition, the accompanying condensed consolidated financial
statements include adjustments to Sundowner's deferred income tax expense to
reflect the combined companies use of the Company's net operating loss
carryforwards for U.S. federal income tax purposes.
Operating results of the separate companies for the three months ended December
31, 1993 are as follows:
<TABLE>
<CAPTION>
Revenues Net Income
-------- ----------
<S> <C> <C>
Nabors $117,599 $ 8,538
Sundowner 16,333 397
Deferred income tax adjustment - 130
-------- -------
$133,932 $ 9,065
======== =======
</TABLE>
During January 1995, the Company acquired Delta Drilling Company ("Delta"), a
company engaged in the business of contract land drilling in the United States.
The purchase price of Delta was approximately $20 million in cash. The
acquisition will be recorded using the purchase price method of accounting.
5
<PAGE> 7
NOTE 3 MARKETABLE SECURITIES
During December 1994, the Company reclassified certain
investments in equity securities to trading securities as a result of a tender
offer for the Company's investment, which the Company expects to accept during
the current fiscal year. As a result of this reclassification, the Company
recorded a gain in other income of $1.2 million.
NOTE 4 CAPITAL STOCK
During the three month period ended December 31, 1994, 109,000
options were exercised at prices ranging from $1.10 to $4.90 per share. In
addition, 50,000 common shares were issued upon vesting under a stock award
plan.
During December 1994, the Company purchased 250,000 shares of
its common stock in the open market at a cost of $1.7 million, or $6.80 per
share.
During October 1994, the Company completed its merger with
Sundowner whereby the Company acquired all of the outstanding shares of
Sundowner in exchange for 13.1 million newly issued registered shares of the
Company's common stock (Note 2).
Earnings per share are determined using the weighted average
number of shares of stock outstanding for the periods reported. Stock options
and warrants are included in the weighted average number of shares as common
stock equivalents if dilutive, calculated using the treasury stock method.
NOTE 5 COMMITMENTS AND CONTINGENCIES
A petition was filed on March 4, 1994 in the 61st Judicial
Court, of Harris County, Texas against Nealwell Drilling Limited ("Nealwell")
and Sundowner, asserting that Nealwell breached a contract and Sundowner
tortiously interfered with alleged contract rights of Primrose Drilling
Ventures, Ltd. for the purchase of the Nealwell II jackup workover rig. The
Nealwell II (renamed the Dolphin III) was acquired by Sundowner in November
1993 for $2 million in cash. Primrose has alleged approximately $34.5 million
in actual damages as well as an amount of exemplary damages not less than its
actual damages. Company management believes that the litigation instituted by
Primrose is without merit and intends to vigorously defend all claims of
Primrose. Moreover, management believes that the amount of alleged damages
bears no reasonable or conceivable relation to the replacement value of the rig
or the revenues or other economic benefits to be derived from the rig in the
foreseeable future.
Sundowner has filed a cross-claim against Nealwell asserting
that, if the alleged contract existed between Primrose and Nealwell for the
sale of the rig, Nealwell fraudulently misrepresented or concealed that fact
from Sundowner. The cross-claim seeks recovery of any damages incurred by
Sundowner as a result of Nealwell's misrepresentations or concealment of facts
regarding the alleged contract. This case is in the preliminary discovery
stages.
The Company is a defendant or otherwise involved in a number
of lawsuits. In the opinion of management, the Company's ultimate liability
with respect to these lawsuits is not expected to have a significant or
material adverse effect on the Company's consolidated financial position or
results of operations.
6
<PAGE> 8
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 1995 COMPARED TO FIRST QUARTER OF FISCAL 1994
During October 1994, Nabors and Sundowner completed a tax-free
merger. Under the merger agreement, Sundowner stockholders received 2.8 shares
of the Company's common stock for each of their shares of Sundowner, or
approximately 13.1 million common shares. The exchange resulted in former
Sundowner stockholders owning approximately 15% percent of the common stock of
Nabors outstanding after the merger.
The merger has been accounted for as a pooling-of-interests.
Accordingly, the accompanying condensed consolidated financial statements have
been retroactively restated to include the results of operations, financial
position and cash flows of Sundowner for all periods prior to the consummation
of the merger.
The Company's revenues totaled $126 million during the first
quarter of fiscal 1995 ("Current Quarter"), a decrease of $7.9 million, or 6%,
compared to the same period in fiscal 1994. Operating income and net income
during the Current Quarter totaled $13.7 million and $11.1 million ($.13 per
share), respectively, representing a 25% and 22% increase, respectively, over
the prior year comparable period.
The decrease in revenues during the Current Quarter was
attributable to the International (excluding the UK North Sea, Canada and
Sundowner's international operations) and UK North Sea operations, partially
offset by increased revenues in the Company's Alaska operations. Operating
income increases were primary attributable to the improved performance of the
Company's International and Gulf of Mexico workover operations. Operating
income was below the comparable quarter of the prior year in the US Lower 48
and Canada and the UK North Sea.
Alaska revenues totaled $19 million during the Current
Quarter, representing a $1.4 million, or 8%, increase over the prior year
comparable period. Drilling revenues increased during the Current Quarter as
equivalent rig years increased to 6.2 years during the Current Quarter compared
to 4.3 years during the prior year period. Peak Oilfield revenues increased
during the Current Quarter due to higher activity.
The Company's US Lower 48 and Canada revenues totaled $56.9
million during the Current Quarter, essentially the same amount as the prior
year period. Decreases in US Lower 48 revenues were partially offset by
increased Canadian revenues. The decrease in US Lower 48 revenues was
primarily attributable to there not being any turnkey revenues recorded during
the Current Quarter compared to $8.6 million of turnkey revenues recorded
during the prior year period. Canada revenues increased due to the continued
strong activity in that market. Equivalent rig years for the US Lower 48 and
Canada during the Current Quarter totaled 99.7 years compared to 90.7 years
during the prior year period.
International revenues (excluding the UK North Sea, Canada and
Sundowner's international operations) totaled $22.1 million during the Current
Quarter, a decrease of $6 million, or 21%, compared to the prior year period.
The decrease was attributable to decreased logistical and drilling activity in
Yemen due to political turmoil, diminished exploration prospects and
scaled-back development plans as well as an overall decrease in drilling
activity in the Middle East
7
<PAGE> 9
caused by continued lower oil prices. Partially offsetting the lower activity
in the Middle East, was the increased revenues in the Company's Venezuela
operations due to increased activity. Equivalent International rig years,
excluding labor contracts, totaled 20.3 years during the Current Quarter
compared to 24.9 years during the prior year period. Labor contracts totaled 4
years and 3 years during the Current Quarter and prior year quarter,
respectively.
In the UK North Sea, revenues decreased by $2.5 million, or
17%, to $11.9 million during the Current Quarter due to reduced incentive
contracts. Equivalent rig years totaled 7 years during both the Current
Quarter and the prior year period. All of the 7 rig years during the Current
Quarter were labor contracts, and 4 of the 7 years during the prior year were
labor contracts.
Sundowner workover revenues in the Gulf of Mexico and
Internationally totaled $13.8 million and $2.3 million, respectively, during
the Current Quarter. This represented a $1 million, or 7%, decrease in the
Gulf of Mexico and a $.8 million, or 49%, increase Internationally during the
Current Quarter compared to the prior year period. The decrease in Gulf of
Mexico revenues during the Current Quarter was partially attributable to lower
plugging and abandonment revenues. During the Current Quarter, equivalent rig
years for the Gulf of Mexico and Internationally totaled 15.4 years and 2.5
years, respectively, compared to 12.4 years and 2.8 years, respectively, during
the prior year period.
Direct costs as a percentage of revenues totaled 74% during
the Current Quarter compared to 78% during the prior year period. The
Company's International gross margins improved in Yemen as prior years cost
reduction measures have taken effect. Also, Sundowner workover margins in the
Gulf of Mexico improved during the Current Quarter due to the increase in the
number of Sundowner owned rigs working and a decrease in the number of
chartered rigs working. Depreciation recorded on owned rigs is excluded from
direct costs while lease payments made on the chartered rigs is included in
direct costs resulting in higher gross margins earned on the owned rigs. These
improvements were partially offset by reduced gross margins in the US Lower 48
primarily resulting from there not being any turnkey revenues recorded during
the Current Quarter. General and administrative expenses and depreciation and
amortization expense were comparable between the Current Quarter and prior year
period.
The Company recorded nominal losses on fixed asset sales
during the Current Quarter compared to $1.6 million of gains recorded during
the prior year period. The Company recorded a $1.2 million gain, included in
other income, during the Current Quarter resulting from the reclassification of
certain equity securities from available-for- sale to trading securities, as
the Company expects to sell these equity securities during the current fiscal
year.
During fiscal year 1994, the Venezuelan bolivar devalued by
approximately 75%, as compared to the U.S. dollar, due to the deterioration in
that country's economic condition. During June 1994, the Venezuelan government
imposed exchange control policies and an official fixed exchange rate of 170
bolivars to the U.S. dollar. As a result of the devaluation, the Company
recorded translation losses totaling $1.5 million during fiscal year 1994.
Subsequent to the June 1994 establishment of the official fixed exchange rate,
the Company has not incurred any translation losses. Since fiscal 1994, the
Company has reduced its bolivar net monetary asset exposure. However, if the
Venezuela government allows the bolivar to "float' relative to the U.S. dollar
or revises the official fixed exchange rate, the Company could incur additional
translation losses.
The income tax provision increased during the Current Quarter
due to higher foreign taxes, primarily in Canada, Venezuela and Australia.
8
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $6.6 million
during the Current Quarter, compared to $.3 million net cash used during the
prior year period. During the Current Quarter, net income as adjusted for
non-cash items, such as depreciation, was partially offset by the negative
impact on cash from the changes in the Company's working capital accounts. In
the prior year period, net income adjusted for non-cash items was entirely
offset by the negative impact on cash from the changes in the Company's working
capital accounts.
Net cash used for investing activities totaled $9.2 million
during the Current Quarter, compared to $10 million during the prior year
period. Capital expenditures and purchases of marketable securities
represented the primary uses of cash during the Current Quarter, partially
offset by maturities of marketable securities. During the prior year period,
capital expenditures and purchases of marketable securities represented the
primary uses of cash.
Financing activities used cash totaling $11.0 million during
the Current Quarter, compared to net cash provided totaling $9.6 million during
the prior year period. Cash used during the Current Quarter, resulted from
scheduled principal payments on long-term obligations and the reduction in
short-term borrowings. In the prior year period, net cash was provided from
the proceeds from a public stock offering by Sundowner, partially offset by the
paydown of long-term obligations.
The Company's cash, cash equivalents and short-term
investments totaled $32.3 million as of December 31, 1994. In addition, the
Company has long-term investments in marketable securities totaling $9.5
million. The Company currently has credit facility arrangements with a number
of banks totaling $38.3 million. These credit facilities are limited at any
given time to receivables of certain of the Company's subsidiaries. As of
December 31, 1994, remaining availability, after borrowings on the facilities
and outstanding letters of credit, totaled approximately $22.3 million.
The current cash, short-term investments in marketable
securities, credit facility position and the projected cash flow generated from
current operations is expected to adequately finance the Company's
non-discretionary capital and debt service requirements for the next twelve
months.
As of December 31, 1994, the Company had capital expenditure
commitments totaling approximately $5.3 million.
During January 1995, the Company acquired Delta requiring the
payment of $20 million in cash. These funds were provided by internal funds
and borrowings from the Company's credit facilities.
9
<PAGE> 11
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended December 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NABORS INDUSTRIES, INC.
Anthony G. Petrello
President and Chief
Operating Officer
Bruce P. Koch
Corporate Controller
Dated: February 13, 1995
10
<PAGE> 12
EXHIBIT INDEX
Index
Number
------
27 Financial Data Schedule
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-95
<PERIOD-START> OCT-01-94
<PERIOD-END> DEC-31-94
<CASH> 9,008
<SECURITIES> 23,310
<RECEIVABLES> 110,705
<ALLOWANCES> 0
<INVENTORY> 15,721
<CURRENT-ASSETS> 175,315
<PP&E> 483,262
<DEPRECIATION> 191,160
<TOTAL-ASSETS> 486,953
<CURRENT-LIABILITIES> 94,409
<BONDS> 0
<COMMON> 8,454
0
0
<OTHER-SE> 314,657
<TOTAL-LIABILITY-AND-EQUITY> 486,953
<SALES> 126,002
<TOTAL-REVENUES> 126,002
<CGS> 93,745
<TOTAL-COSTS> 93,745
<OTHER-EXPENSES> 18,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,948
<INCOME-PRETAX> 13,551
<INCOME-TAX> 2,478
<INCOME-CONTINUING> 11,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,073
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
